Deposit Protection

What is Deposit Protection?

Deposit protection is a scheme established by government to protect depositors against the loss of their insured deposits placed with member institutions licenced to operate banking or finance business. As an integral component of an effective financial safety net, a Deposit Protection Scheme enhances consumer protection by providing explicit protection to depositors. Depositors will know when, how much and how their deposits are protected in the event of a bank failure.

Deposit protection scheme contributes to financial stability and prevent bank runs if depositors have confidence that they will have access to their funds quickly when a bank fails.

DPC’s Public Policy Objectives

In line with international best practice, the Deposit Protection Corporation (DPC) aims at meeting a number of objectives which include the following;

• Protection of depositors by providing compensation in the event of failure of a member institution.
• Contributing to the stability of Zimbabwe’s financial system.
• Enhancing public confidence in the financial system by establishing a framework for the resolution of failing or failed member institutions.
• Administering the Deposit Protection Fund.
• Enhancing competition in the financial sector by creating a level playing field through guaranteeing depositor reimbursements for both big and small member institutions.

DPC’s Mandate

• Besides compensating depositors in the event of a bank failure, DPC actively participates in the resolution of failing or failed member institutions and liquidation of closed banks.

Funding of the Deposit Protection Scheme

• DPC gets its funding from quarterly premium levies collected from member institutions.
• Currently the prescribed annual premium rate is 0.3% of average eligible deposits which premium is paid on a quarterly basis.
• Depositors do not pay premiums for deposit insurance cover. Its a free service to all bank depositors.

Membership of the Deposit Protection Scheme

• Membership is mandatory by law for all deposit-taking institutions registered under the Banking Act (Chapter 24:20), Building Societies Act (Chapter 24:02), People’s Own Savings Bank (POSB) Act (Chapter 24:22), Infrastructure Development Bank of Zimbabwe (IDBZ) Act   (Chapter 24:14) and Micro-finance Act (Chapter 24:29).
• Currently membership includes all commercial banks, merchant banks, building societies, discount houses, finance houses, deposit-taking micro-finance institutions, People’s Own Savings Bank (POSB) and Infrastructure Development Bank of Zimbabwe (IDBZ).

What is the maximum insurable limit (cover limit)

• USD deposits: Deposit protection maximum cover level is pegged as follows: USD1,000.00 (One Thousand United States Dollars) per deposit class per contributory institution; and USD500.00 (Five Hundred United States Dollars) per deposit class per deposit-taking microfinance institution;
• In the event of failure of a member institution, a client is guaranteed to receive compensation in full provided the account balance is equal to or below the prescribed cover limit.
• Deposit balances above the prescribed cover limit will be paid through the liquidation process on a pro-rata basis.
• The cover limit is reviewed from time to time in line with the Corporation’s standard practice.

Scope of cover (classes of deposits covered)

All types of deposits received by a contributory institution in its usual course of business are protected and include without being limited to the following―

• time/fixed deposits;
• demand deposits;
• savings deposits;
• interest accrued and/or payable on all deposits;
• shares in a building society (class B&C shares), other than capital shares, deferred shares or preference shares;  and
• any other liability or financial instrument as may be specified by the Corporation from time to time by notice in the Government Gazette.

Qualifying deposits in individual, corporate and trust accounts in insured institutions are covered by the Deposit Protection Scheme.

Scope of cover (deposits NOT covered)

All investment or funds that do not meet the criteria established in the definition of insurable deposits are not protected by deposit insurance and include the following―

• securities purchased by contributory institution on behalf of the depositor;
• interbank deposits;
• government deposits, local or foreign;
• a deposit that is not payable in Zimbabwe;
• contents of safety deposit boxes;
• unit trust/managed funds;
• debentures issued by a contributory institution;
• deposits of executive management, board members or shareholders of a contributory institution;
• negotiable certificates of deposit;
• bankers acceptances;
• repurchase agreements;
• capital shares;
• deposits deposited by other domestic or foreign banks on their own account;
• drafts or managers cheques issued to trade creditors; and
• any other liability or financial instrument as may be specified by the Corporation from time to time by notice in the Government Gazette.

Benefits of deposit protection:

Benefits to Depositors:

• Deposit protection ensures that depositors do not lose all of their hard earned savings in the event of failure of a member institution.
• Depositors will know how and when reimbursement of their deposits will be made in the event of failure of a member institution.
• Deposit protection is automatic once a depositor opens an account with an insured institution. No application is required.
• There is no charge to depositors for deposit protection, member institutions bear the cost of deposit protection.

Benefits to the Financial System

• DPC promotes public confidence in the Zimbabwean  financial system by protecting depositors against the loss of their deposits.
• Deposit insurance complements the  supervisory and regulatory framework by providing incentives for sound risk management in the financial system.
• Deposit protection reduces the likelihood of panic withdrawals and bank runs thereby enhancing stability and confidence in the financial sector.
• Deposit protection contributes to the  the stability of the financial system by dealing with bank failures expeditiously and reimbursing depositors promptly.

Reimbursement & Claim Procedure.

• When a member institution is placed under closed or liquidated, the Corporation is mandated by law to pay depositors who have lost their deposits.
• DPC advises the insured depositors via electronic or print media  to collect claim forms from its offices or download from the website in order for them to be compensated.
• Under normal circumstances, once a duly completed and certified claim form has been submitted together with supporting documents (copy national ID, valid passport or valid driver’s licence), a depositor is reimbursed within 4 working days from date of submission of a duly completed claim form.
• In order to provide clients with greater convenience, payments are made either through mobile phone or bank transfers.